Your Opinion - Down Payment on New Vehicle?

I have never put a down payment on a new vehicle, only turned in the current vehicle for trade in value. I also walk in pre-approved from my bank, although the dealership always jumps to match the approval rate.

It may be this year that I will shop for a new vehicle and I have wondered if maybe this time I will put a down payment on it. But what are the pros? Any cons? If you have went the down payment route, what was your experience? Thanks!

 

So you finance but have only had the trade value as down in the past? More down lessens the amount financed. Or am I missing something here?

 

Your value of your trade in the past was a down payment essentially.

if its 0% financing or very low rate, there is little reason to put a down payment.

Never put a down payment on a lease (Multiple Security Deposits can be good to reduce rate though)

I have bought cars every way from cash to sign-and-drive w/ nothing out of pocket. Every situation is different.

 

Very few lenders "require" a down payment for those with top 2 tiers credit. Some sub-prime lenders will require $$ down to reduce the LTV risk.

If you have good credit, and the dealer is telling you a down payment is required, they might be trying to pull something. But this tactic isn't used as much as it was say 10-20 years ago

 

Go with 0 financing. You can kick in each month from the “Downpayment” fund if desired.

 

I put about 80% down on my vehicle last year. I did this strictly for cash flow purposes. I did not want to have a massive car payment over my head for five years. I received high wholesale offer from a company and then did an “in and out” with the dealership to save on taxes.

 

We're 0%-ers or all-cash. We've been out of buy mode since replacing the Ridgeline in May, but I am still seeing a number of 0% offerings out there.

 

Pros: unless you finance at true 0% interest, you're throwing away extra money in interest the more you finance. Depending on your trade value, you're most likely also upside down for a while and wasting additional money on gap insurance. I put about 50% down on my Mercedes; it's the most I've ever paid for a car but the lowest monthly payment I've ever had. No gap insurance because it was never upside down, and the total interest cost over 5 year loan was just under $300 if I recall correctly.

Cons: if you dont leave enough cash in the bank for emergencies, interest on emergencies, if you have to borrow or put them on a credit card god forbid, will usually cost significantly more than car loan interest.

 

I don't think I've actually had to put down cash up front on any car since I was in my 20s. They are always eager to sell and eager to lend and the last couple of cars the rates were so low that they really didn't matter.

In fact, I'm off-and-on looking at a new car and it seems like the promotional rates are so low, even though technically I could take it out of savings and pay cash, or go to the credit union, it's almost free money.

 

All depends on current rates, how much the new car is, how much the trade in is worth yada yada. Currently with rates this low, and buying a NEW car should yield even better rates. There is no reason to put money down. That money would be better invested elsewhere. Lots of automakers offer 0 percent (or very close to it) rates for NEW cars, keep that in mind if you walk in with the plan of using you're own bank to finance.

 

I know we have any number of savvy, active investors here. And that caveat about "doing better elsewhere" is (can be) true. But some people simply don't have the time, inclination or interest in doing other than padding the low-yield CD or putting max (anything?) into deferred comp. So what makes perfect sense for some of us does not apply to all.

 

I was curious about the the ins and outs of a down payment. LIke I mentioned, I never did it and was never required to do so when purchasing.

Thanks, all!

 

Could you elaborate on this a little? I am getting close to getting a new car, and am contemplating purchase vs lease. I've never leased before and want to be armed with the best info before I step foot in the dealership.

 

I’m thinking he wants a wider view of borrowing than just over the last 10-12 years dmr....

 

Really does not matter as far as the car goes. Really, it is more of a question of CASH purchase vs finance. You decide how much to finance vs giving them cash.

Since we have no idea of your credit score, or how much other debt you have and at what interest rate, hard to answer.

There are no in's or out's about it.

For example.

$35,000 purchase price, including all taxes, fees, etc

You can finance $35k
You can pay cash of $35k
You can give them $5k of cash (down payment) and then finance $30k.

It is ZERO bearing on the value of the car today, or when you trade it

If all comes down to borrowing or not borrowing money. It really has nothing to do with the car.

 

lots of good advice on youtube on how NOT to get screwed by the car dealerships.

 

When I bought Giulia last year, I received a 0.9 interest rate. Outside of the first month payment, I put no other money down. At rates this low, it made more sense to invest the money.

 

Weigh the options of both sides of the question. What's the money cost for both ends.

 

There is no magic one-for-all formula among debt/liquidity/investment.